If today’s Black’s Beach rescue news wasn’t enough (Google it yourself), price hit the common five-day moving average exit target early on, found support, and immediately proceeded to exhibit strong tell-tale signs of naked short-covering (ha ha) right up to the final hour, when an all clear to short was loudly broadcast.
OK, not really on the later, but reading relative volume signs was a good stand in that paid handsomely:
[White Dashed Line = Relative Volume; Magenta Dashed Line = 5-DMA]
For more on ‘reading’ relative volume, review this classic archive piece, as well as, importantly, specific hints on when not to fade these peaks, as in today. In particular, note the major fall-off of relative volume even as price peaked in the last dash to SPY $130 on the chart above. There was also a coincident divergence in Tick, another helpful sign. The day was also light in volume overall. Certainly short-covering often precedes further advances on real buying, but for now, SPX 1,300 remains legitimate resistance with the falling twenty- and fifty-day moving averages just above that again. As always, we’ll see soon enough….
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